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An Avenue for Expansionary Fiscal Contractions

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  • António Afonso

Abstract

Expansionary fiscal contractions were first illustrated by several fiscal episodes that occurred in Europe during the 1980s. This paper suggests a simple analytical textbook model that encompasses both Keynesian and non-Keynesian effects of fiscal policy. In such a context, the possibility of expansionary fiscal contractions is linked to the responsiveness of the risk premium of domestic interest rates to the budgetary position of the government and to the existence of credit-rationed consumers.

Suggested Citation

  • António Afonso, 2007. "An Avenue for Expansionary Fiscal Contractions," The IUP Journal of Public Finance, IUP Publications, vol. 0(3), pages 7-15, August.
    • Handle: RePEc:icf:icfjpf:v:05:y:2007:i:3:p:7-15
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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